Dow Falls: Investors Weigh Moves

By Janet Paskin

The markets suffered their worst loss since the middle of August today, as investors grew increasingly skittish about the financial crisis in Europe and doubts about President Barack Obama’s plan to stem unemployment at home. The news that the U.S. received “credible” information pointing to another terrorist attack to coincide with the tenth anniversary of the Sept. 11 attacks didn’t help.

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The Dow Jones Industrial Average dropped 303 points today, down almost 3% in the four-day week. Those are scary numbers for plenty of investors, particularly after the wild swings of early August. But some experts say the new developments create a buying opportunity. The plunge in Europe has battered a slew of European stocks, banks in particular. The better deals may be in European telecoms, which offer substantial dividends. European industrials are also cheap, and may get a boost in the coming weeks and months if the falling euro makes their exports cheaper.

Most investors, however, have exposure to European stock markets through mutual funds, both international and domestic. European bank stocks, the epicenter of concern, comprise about 20% of the MSCI EAFE index, the benchmark for most developed international funds. Fund investors who own an international fund can expect to have roughly the same amount of exposure, more or less. Some international funds have more than 34% of assets invested in European bank stocks, which may pose more risk than some American investors have anticipated.

They wouldn’t be alone: German political officials have been awfully nervous about those banks, too.

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